Published on The Print
President Gotabaya Rajapaksa was forced to impose an economic emergency on 31 August to contain soaring food inflation, and currency devaluation and forex reserves crisis.
Sri Lanka has been hit by a serious economic emergency even as it struggles to tackle the Covid-19 pandemic.
Dwindling foreign exchange reserves, a sinking currency and soaring food inflation have come together to create a crisis which is unprecedented even by the record of the island nation that was torn by civil war for decades.
The surge in food prices and a real fear of hoarding of essential food items was the last straw that forced President Gotabaya Rajapaksa to impose the economic emergency on 31 August under the public security ordinance.
At the root of this economic catastrophe is a bizarre overnight flip by Rajapaksa’s government on 29 April to ban the import of chemical fertilisers and any other agrochemicals to make the Indian Ocean nation the first in the world to practice organic-only agriculture.
The result: prices of daily food items like sugar, rice and onions have soared over twice, with sugar even touching record Rs 200/kg; kerosene oil and cooking gas prices are surging; tea crops are predicted to fail in October; and there are fears over a hit to production of other crucial export crops like cinnamon, pepper, rubber, cardamom, cloves, nutmeg, betel leaves, cocoa, and vanilla.
These developments come amid a 30 basis points rise in the month-on-month inflation in the country, jumping to 6 per cent in August from 5.7 per cent in July. Its foreign reserves plunged 62% to $2.8 billion in July against $7.5 billion in November 2019. Moreover, the Sri Lankan rupee has fallen 7 per cent against the US dollar this year.
According to the Sri Lankan government, two primary reasons have driven the inflation — crashing tourism due to the pandemic, and hoarding of food items. The dip in tourism also hit the forex reserves.
The crisis has now reached such a proportion that a former army general has been appointed as ‘commissioner general of essential services’ to raid and seize food stocks. The officer has been tasked to ensure sale of products at government-named prices or on custom import costs. Sri Lanka is a net food importer.
‘Unimaginable’ — the ground situation
According to major Sri Lankan tea conglomerate Herman Gunaratne, one of 46 experts picked by President Rajapaksa to spearhead the organic shift, the move’s consequences for the country are unimaginable.
“The ban has drawn the tea industry into complete disarray… If we go completely organic, we will lose 50 per cent of the crop, (but) we are not going to get 50 per cent higher prices,” he reportedly said.
Gunaratne pointed out that the ban will cut the country’s average annual tea production of 300 million kg to half. Moreover, as production of organic tea costs 10 times more, its market is limited too.
According to an estimate, tea is Sri Lanka’s single biggest export, bringing in over $1.25 billion/year, which is nearly 10 per cent of the country’s export income.
Former central bank deputy governor W.A. Wijewardena reportedly termed the organic plan as a “dream with unimaginable social, political and economic costs”. He said Sri Lanka’s food security had been “compromised” and without foreign currency, it’s “worsening day by day”.
An island-wide survey of farmers found out that 90 per cent use chemicals for farming and 85 per cent expected sizable reductions in their harvest if disallowed to use fertilisers. Moreover, the survey said that only 20 per cent farmers had the knowledge to transition to completely organic production.
It also found that 44 per cent farmers are experiencing a decline in harvests, and 85 per cent are expecting a fall in the future.
The survey also revealed that many key crops in Sri Lanka depend on heavy use of chemical input for cultivation, with the highest dependency in paddy at 94 per cent, followed by tea and rubber at 89 per cent each.
With the shift from chemical to organic cultivation, Sri Lanka needs a large domestic production of organic fertilisers and biofertilisers. However, the situation is very bleak.
According to an estimate, the country generates about 3,500 tonnes of municipal organic waste every day. About 2-3 million tonnes of compost can be produced from this on an annual basis.
However, just organic paddy cultivation requires nearly 4 million tonnes of compost annually at a rate of 5 tonnes per hectare. For tea plantations, the demand for organic manure could be another 3 million tonnes.
Threat to food security?
According to experts, three scientifically rigorous meta-analyses of organic-conventional crop yield comparisons indicate that across all crops, the mean yield reduction in organic agriculture in Sri Lanka is around 19-25 per cent. This shows that an overnight shift to organic cultivation presents a clear and imminent threat to the country’s food security.
Eminent researchers have also noted that organic farming increases farmland due to its low yields. This results in deforestation, leading to large scale extinction of species and a rise in greenhouse emissions.
According to the Annual Review of Resource Economics, organic agriculture generates more air pollutants and environmental emissions in the crop production process for a unit of food than chemical farming.
Moreover, organic farming has exponentially higher monetary input costs due to a lack of usage of pest and pathogen-resistant chemicals, which increases manual labour, according to experts. The additional processing and marketing costs of organic produce is also significantly higher, analysts said.